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8. Who Benefits? Distributional Effects of Early Childhood Programs and Business Incentives, and Their Implications for Policy
- W.E. Upjohn Institute
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219 8 Who Benefits? Distributional Effects of Early Childhood Programs and Business Incentives, and Their Implications for Policy How do early childhood programs affect the poor, the middle class, and the rich? The answer to this question is important for several reasons. First, effects on different income groups may change these programs ’ social benefits. In this discussion, I assume that programs that tilt benefits toward the poor are more socially desirable. Policymakers, policy analysts, and voters may favor such a tilt because of special concern for the poor. Alternatively, policymakers, policy analysts, and voters may be concerned with making the income distribution more equal. A more equal income distribution may increase the number of people who can meet social standards for being a respectable member of society . Concern over the income distribution may be greater at present because over the last 30 years the U.S. income distribution has become more unequal. To address concerns about the poor, we need information on whether early childhood programs significantly affect the incomes of the poor. To address concerns about the income distribution, we need information about how the effects on the poor compare with effects on other income groups.1 Second, how early childhood programs affect various income groups may influence who will provide these programs with political support. An income group’s support for a program may depend on what the program implies in taxes and benefits for that group. Assessing patterns of political support requires comparing the program’s benefits with taxes for different income groups. Adopting and sustaining a program requires political support that is sufficiently powerful. Third, how a program affects different income groups may influence program design. For early childhood programs, one important design issue is whether these programs should be targeted at children in lower 220 Bartik income groups, or whether services should be universally available to all children. This is most prominently an issue for pre-K education programs . The targeting versus universal service debate is advanced by looking at specific numbers for how programs benefit different income groups under different designs. To frame this chapter’s discussion, I begin with arguments for targeting pre-K education at the poor versus universalizing pre-K education . I then consider the effects on different income groups of business incentives. The effects of business incentives provide a baseline for considering the income distribution effects of early childhood programs. I then go on to provide estimates of the income distribution effects of pre-K programs under various assumptions about program design and program effects. Finally, I consider the income distribution effects of other early childhood programs. In this chapter, I show that under a variety of distributional assumptions , early childhood programs have net overall benefits that are progressively distributed. Business incentives are more likely to benefit all income groups, but they provide much less net benefit for the poor. Among early childhood programs, universal pre-K, which combines large benefits for the poor with broad benefits for all income groups, has economic and political advantages. TARGETED PRE-K VERSUS UNIVERSAL PRE-K Advocates for targeting pre-K education argue that policymakers should invest where returns are greatest. Targeting advocates perceive returns as being greatest for children from lower income families. Nobel Prize–winning economist James Heckman (2005) makes the following argument: “I think the evidence is very strong that family background is a major predictor of future behavior of children. So a disproportionate number of problem kids come from disadvantaged families. The simple economics of intervention therefore suggests that society should focus its investment where it’s likely to have very high returns. Right now, that is the disadvantaged population . . . Functioning middle-class homes are producing healthy, productive kids . . . It is foolish to try to substitute for what the middle-class and upper-class parents are already doing” (p. 24). [3.229.122.112] Project MUSE (2024-03-19 06:34 GMT) Who Benefits? 221 Advocates for universal services make two arguments. The first is that even if pre-K’s benefits are greater for the poor, pre-K may still have benefits for middle-class children that exceed its costs. Steven Barnett , codirector of the National Institute for Early Education Research (NIEER), argues that “if the development of children in higher-income families is taken as an indicator of what is optimal, then it is clear that not only children in poverty, but children at the median income are entering school far less prepared to succeed than they...